Preparing to capitalize on the next market collapse

Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes

Every day I spend some time in the morning getting up to speed on the latest state of the real estate market by reading various news outlets, listening to economists, looking at data around inflation/inventory/rates, etc. There are 2 things that I've gathered from the last couple of months that everybody seems to agree on:

1. Nobody knows for sure where the residential real estate market is headed.

2. Everybody seems to agree that there is serious pain ahead in the commercial real estate market.

As far as I can tell, the challenges in commercial real estate are centered around a few factors:

-Many loans coming to due in 2023 (about $270 billion worth), meaning owners will be forced to refinance or sell this year.

-Vacancy rates are high (specifically in office and retail, also depending on the region). AND interest rates are high. Meaning that if an owner is forced to refinance when their loan matures, they will get stuck with a much higher payment on a property generating much less income due to vacancies.

-Vacancy rates in office are already showing some serious blows to office valuations. It may be an anomaly but just last week it was reported that an office building in San Francisco worth $300,000,000 in 2019 is expected to sell for $60,000,000 today. Ouch. Link

-The vacant office space is causing a ripple effect. If a 100,000 square foot office building is sitting 35% vacant in the heart of Manhattan or San Francisco, that is not just a problem for the office building owner. The surrounding retail shops who depend on those office employees as customers are hurting as well. And if they don't have as many customers, they are less likely to be able to afford their rent. Which is not good for the owners of those retail buildings either.

-According to various reports, real estate accounts for ~25% of US banks books and as much as 65% for smaller banks. If commercial real estate owners start walking away from their buildings, these smaller banks could also be in big trouble.

As of now they say most debt on commercial real estate is being paid as agreed. But this feels like a "calm before the storm" to me.

Would love to hear the perspective of those who are wiser than me on what the future holds in commercial real estate. I can't help but think that we are about to experience a lot of pain and a lot of opportunity in commercial real estate.

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Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

Quote from @Scott E.:

1. Nobody knows for sure where the residential real estate market is headed.

2. Everybody seems to agree that there is serious pain ahead in the commercial real estate market.

You are being too rational. We've passed the point of rationality long ago (2008). (actually, long before that but most of you weren't around then).

What does every government want? To be re-elected.

As such, yes there will be some pain in the Commercial Sector but recovery in the Residential. Banks will belch money, bleed and merge, people that should go to jail for fraud and deception won't. The blame will be placed on China and imports or on Russia and oil, but life will go on much as it has since World War Two. No real economic correction.

With fractionalized banking and the economy dependent on debt spending instead of savings, and an election looming, the government won't allow things to fail and everyone will adjust in short order. There is no longer a need to print money since they can just add another zero to a spreadsheet at the Treasury.

Ya'll are talking like the Fed, Treasury, Banking System & investors are rational, on our side and trying to do the right thing for the American people, but they aren't. They will do what is necessary to get re-elected, make money, escape jail, whatever it takes and enough of you will vote for a repeat of the current government to keep things going like a clown at a circus twirling plates on sticks.

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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Quote from @Brad Jacobson:

The data point that has me most interested is inventory on market.

In 2007, there were over 4,000,000 residential homes available before the bubble burst. Today, there is less than 1,000,000 despite the high rates. That tells me the residential market is pretty secure.

Commercial properties are the opposite. There are tons of vacancies and much lower demand. I wish I had better numbers on this because my only data is only anecdotal but everyone in commercial I speak to currently worries about banks holding too many bad commercial loans that will all have their rate adjust in the next two to three years.

The fundamental problem with office is that many companies are moving into hybrid workplace where people only come 1-3x a week to office.
From the chart that I read, from realized PSF positioning perspective, PSF required for employee to be working in 2023 has regressed to 2002 level, so if PSF has reduced a lot, then all office ,especially the one build in 1980s, shall have valuation moved to 2002 level. This is the one that's not happening yet in private commercial.

For tech companies, it's true that for company that's solely focusing on software, most of them already moved to 90% work from home anyway.

Most companies want to move away from this and go to either a hybrid (3X/week) or full-time attendance model. Right now, companies still don't have the kind of leverage needed to enforce this, but if the economy does actually reset, they will definitely have more leverage. At least that's the hope. My company is currently on a hybrid schedule but I know they're itching to return to full time. Even with the layoffs, we still have a tight labor market. We are still in a place where reversion to the norm is a long distance. But once we do get back to a dynamic where each new job opening will elicit dozens of qualified resumes, I don't see this can continue.

have lot of comments, one by one :
- I checked the most recent layoff data for startup only as they're one that's most vulnerable, currently at 5/5/2023 the layoff has been normalized meaning the number has been greatly reduced almost near to the average. Most startup funding now tap into bridge commercial loan these days rather than ask for equity investment.
- where company moving forward it seems divided, some want move like before, but most 'software only' co or investment only company is working through 100% WFH model , it seems not having office or greatly reducing office opex is way to go, look at google co where they immediately stopped the project to rebuild campus in downtown san jose
- it seems the majority is still willing to choose hybrid model, not just because of office opex is less but people seems enjoying more work-life-balance these days.
- dont think there would be reversion to the norm. Full 5 days working to office is gone in this century LOL, trend is move into hybrid 2-3-4 days coming to office LOL Friday is the new saturday.
0 Reply
Tony Kim
Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes
3y
Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Quote from @Brad Jacobson:

The data point that has me most interested is inventory on market.

In 2007, there were over 4,000,000 residential homes available before the bubble burst. Today, there is less than 1,000,000 despite the high rates. That tells me the residential market is pretty secure.

Commercial properties are the opposite. There are tons of vacancies and much lower demand. I wish I had better numbers on this because my only data is only anecdotal but everyone in commercial I speak to currently worries about banks holding too many bad commercial loans that will all have their rate adjust in the next two to three years.

The fundamental problem with office is that many companies are moving into hybrid workplace where people only come 1-3x a week to office.
From the chart that I read, from realized PSF positioning perspective, PSF required for employee to be working in 2023 has regressed to 2002 level, so if PSF has reduced a lot, then all office ,especially the one build in 1980s, shall have valuation moved to 2002 level. This is the one that's not happening yet in private commercial.

For tech companies, it's true that for company that's solely focusing on software, most of them already moved to 90% work from home anyway.

Most companies want to move away from this and go to either a hybrid (3X/week) or full-time attendance model. Right now, companies still don't have the kind of leverage needed to enforce this, but if the economy does actually reset, they will definitely have more leverage. At least that's the hope. My company is currently on a hybrid schedule but I know they're itching to return to full time. Even with the layoffs, we still have a tight labor market. We are still in a place where reversion to the norm is a long distance. But once we do get back to a dynamic where each new job opening will elicit dozens of qualified resumes, I don't see this can continue.

have lot of comments, one by one :
- I checked the most recent layoff data for startup only as they're one that's most vulnerable, currently at 5/5/2023 the layoff has been normalized meaning the number has been greatly reduced almost near to the average. Most startup funding now tap into bridge commercial loan these days rather than ask for equity investment.
- where company moving forward it seems divided, some want move like before, but most 'software only' co or investment only company is working through 100% WFH model , it seems not having office or greatly reducing office opex is way to go, look at google co where they immediately stopped the project to rebuild campus in downtown san jose
- it seems the majority is still willing to choose hybrid model, not just because of office opex is less but people seems enjoying more work-life-balance these days.
- dont think there would be reversion to the norm. Full 5 days working to office is gone in this century LOL, trend is move into hybrid 2-3-4 days coming to office LOL Friday is the new saturday.

When you say want or willing, are you referring to the employees or high level mgmt? Because I know what employees want :) A lot of them have deluded themselves into thinking they are just as productive at home as they are in the office. I personally like the hybrid model also, but I can tell you without hesitation that although startups don't have strong feelings about coming back to the office, larger companies definitely want at a very minimum a hybrid model. And secretly, they want to move back to a full-time at the office model and they will have the leverage to require that in the future. You have to realize that the labor market is still at usually tight. My company (finance industry) has many req's open with generous salaries. Prepandemic, these openings would get close to a 100 resumes. Now, we aren't able to fill them. Tech companies have a different issue.

Google's halt of its campus was more about caution and the general slow-down in the tech industry as opposed to their desire to move to a WFH model.
2 Reply
Jay ThomasPro Member
Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
3y
It's really incredible to think that, despite all the market knowledge and experience in real estate investing, no one was able to predict a major crash coming. It's almost as if those who acquired $100 million assets were blindsided by the downturn while we outside of the industry could clearly see it from afar. And yet, even with months or years to find a solution, these people are still struggling to get back on their feet. It is for this reason that it is so important for real estate investors to stay informed about what's going on in the market and look out for potential risks ahead of time. This way, they can be better prepared for any unexpected turns that may come their way in the future.
[email protected]832-889-5607
0 Reply
Sonny Dhillon
Investor · Sacramento · Member since 2018 · 40 posts · 10 votes
3y
Quote from @Jay Thomas:

It's really incredible to think that, despite all the market knowledge and experience in real estate investing, no one was able to predict a major crash coming. It's almost as if those who acquired $100 million assets were blindsided by the downturn while we outside of the industry could clearly see it from afar. And yet, even with months or years to find a solution, these people are still struggling to get back on their feet. It is for this reason that it is so important for real estate investors to stay informed about what's going on in the market and look out for potential risks ahead of time. This way, they can be better prepared for any unexpected turns that may come their way in the future.

IMO alot of big deals is not there own money so that's why it's there best interest to buy at that time and bring proformas which are out of ordinary to convinence more people to invest with them , win or loose the higher up 's still make there fees and percentages ..., small investors it's our own skin in the game and thats why we can try to maneuver it and watch it more realistically . Large deasl they could care less because it's all investor money or fund money buying 100 million + deals .
1 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
3y
Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Mike Bybee:

Quote from @James Hamling:

100% agree with that analysis. Also what is not mentioned, the regulators have not required the banks to mark their bond portfolio to market. That consideration isn't even in their stress test eval according to the SVB hearings from the regulators. Literally, as we speak, the community banks are all on tilt, where typically their leverage ratio was at 2-3:1 is now at 10:1 since their bonds are currently worth .50 on the $. This just reinforces your concept that only the big boys will be holding the cards when the music stops. And that is because they are too big to fail. Main street screwed again. Regional banking as we know it today, will be extinct. Much like the S&L debacle back in the 80's.

THis is the playbook in the 1920-1930s too. Remember why JP Morgan exist at the first place ? It's the exact same circumstance.
Any bank failed ? they would just sell it to JPM in one fine weekend. What happened to FRC is so predictable. Now PACW maybe in line for the next weekend to be captured by JPM.

Do you recall the story of how "The House of Rothchild" became the giant it is now, via the Napoleonic war?
They were very wealthy, but not in total dominating control as are now. What they did was set-up a chain of fast ride couriers, a system later used by the Pony Express actually taken as inspiration for such.
And when Napoleon lost at Waterloo, their couriers ran flat out nearly killing the horse to the next in chain, gave the info, then that one raced flat out, unto the next and so on and so fourth so that the Rothchild's were actually the first with the news of the defeat. Being the only ones with this information, they shorted the market and then "leaked" information that Napoleon had WON, and was marching on London at that moment with no forces of strength to longer stand in way of inevitable invasion and fall of London.
The market crashed, hard. And Rothchild made a mint on the short's BUT then bought up EVERYTHING, for now pennies on the dollar. And then the reports arrived from the official sources, the truth that London was safe, Napoleon was defeated.
As dust settled, Rothchild's were now the #1 wealthiest humans alive, in control of seemingly everything.
History is dotted with such events by the 2%, making such consolidation "plays" to consume power and wealth at mind boggling levels. It's the reality for the world, that we do 100% live in a Plutocracy, that's branded a democracy for public consumption.
This that's happening now with inflation, commercial finance, banking, it's a familiar tune wouldn't you say? As Cheney said "never let a good crisis go to waste".

The story about the Rothschilds and Waterloo was actually completely made up 30 years after the fact by an anti-semitic conspiracy theorist, just FYI! It's not actually true. Just thought you should know instead of continuing to spread it.
https://www.independent.co.uk/...
0 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
3y
Quote from @Steve K.:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Mike Bybee:

Quote from @James Hamling:

100% agree with that analysis. Also what is not mentioned, the regulators have not required the banks to mark their bond portfolio to market. That consideration isn't even in their stress test eval according to the SVB hearings from the regulators. Literally, as we speak, the community banks are all on tilt, where typically their leverage ratio was at 2-3:1 is now at 10:1 since their bonds are currently worth .50 on the $. This just reinforces your concept that only the big boys will be holding the cards when the music stops. And that is because they are too big to fail. Main street screwed again. Regional banking as we know it today, will be extinct. Much like the S&L debacle back in the 80's.

THis is the playbook in the 1920-1930s too. Remember why JP Morgan exist at the first place ? It's the exact same circumstance.
Any bank failed ? they would just sell it to JPM in one fine weekend. What happened to FRC is so predictable. Now PACW maybe in line for the next weekend to be captured by JPM.

Do you recall the story of how "The House of Rothchild" became the giant it is now, via the Napoleonic war?

They were very wealthy, but not in total dominating control as are now. What they did was set-up a chain of fast ride couriers, a system later used by the Pony Express actually taken as inspiration for such.

And when Napoleon lost at Waterloo, their couriers ran flat out nearly killing the horse to the next in chain, gave the info, then that one raced flat out, unto the next and so on and so fourth so that the Rothchild's were actually the first with the news of the defeat. Being the only ones with this information, they shorted the market and then "leaked" information that Napoleon had WON, and was marching on London at that moment with no forces of strength to longer stand in way of inevitable invasion and fall of London.

The market crashed, hard. And Rothchild made a mint on the short's BUT then bought up EVERYTHING, for now pennies on the dollar. And then the reports arrived from the official sources, the truth that London was safe, Napoleon was defeated.

As dust settled, Rothchild's were now the #1 wealthiest humans alive, in control of seemingly everything.

History is dotted with such events by the 2%, making such consolidation "plays" to consume power and wealth at mind boggling levels. It's the reality for the world, that we do 100% live in a Plutocracy, that's branded a democracy for public consumption.

This that's happening now with inflation, commercial finance, banking, it's a familiar tune wouldn't you say? As Cheney said "never let a good crisis go to waste".

The story about the Rothschilds and Waterloo was actually completely made up 30 years after the fact by an anti-semitic conspiracy theorist, just FYI! It's not actually true. Just thought you should know instead of continuing to spread it.
https://www.independent.co.uk/...

Well, as a Semitic household and persons, this is news to me and I am not too worried about it, nor do I worry too much on some new internet piece saying "200yrs is not accurate, my story is accurate". If inferring I am being anti-myself.... not to worried on that front either, lol. And I will point out your article has a rather different version from the historical one I recounted.
If look up history of Pony Express, it is noted in their earliest accounts the inspiration of their relay rider system did, in fact, come from that point back when. And I never pointed out Rothchild on the battle-field, that's a new twist, the historical is that he had setup the relay-riders so he could gain the knowledge in rapid fashion because the imminent invasion of London was kind-of a big deal.
Rothchild's do have some twisty unsavory history to them, so I would not say anti-Rothchild equates antisemitic, there not like the semitic-mascot or anything.
0 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
3y
Quote from @Steve K.:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Mike Bybee:

Quote from @James Hamling:

100% agree with that analysis. Also what is not mentioned, the regulators have not required the banks to mark their bond portfolio to market. That consideration isn't even in their stress test eval according to the SVB hearings from the regulators. Literally, as we speak, the community banks are all on tilt, where typically their leverage ratio was at 2-3:1 is now at 10:1 since their bonds are currently worth .50 on the $. This just reinforces your concept that only the big boys will be holding the cards when the music stops. And that is because they are too big to fail. Main street screwed again. Regional banking as we know it today, will be extinct. Much like the S&L debacle back in the 80's.

THis is the playbook in the 1920-1930s too. Remember why JP Morgan exist at the first place ? It's the exact same circumstance.
Any bank failed ? they would just sell it to JPM in one fine weekend. What happened to FRC is so predictable. Now PACW maybe in line for the next weekend to be captured by JPM.

Do you recall the story of how "The House of Rothchild" became the giant it is now, via the Napoleonic war?

They were very wealthy, but not in total dominating control as are now. What they did was set-up a chain of fast ride couriers, a system later used by the Pony Express actually taken as inspiration for such.

And when Napoleon lost at Waterloo, their couriers ran flat out nearly killing the horse to the next in chain, gave the info, then that one raced flat out, unto the next and so on and so fourth so that the Rothchild's were actually the first with the news of the defeat. Being the only ones with this information, they shorted the market and then "leaked" information that Napoleon had WON, and was marching on London at that moment with no forces of strength to longer stand in way of inevitable invasion and fall of London.

The market crashed, hard. And Rothchild made a mint on the short's BUT then bought up EVERYTHING, for now pennies on the dollar. And then the reports arrived from the official sources, the truth that London was safe, Napoleon was defeated.

As dust settled, Rothchild's were now the #1 wealthiest humans alive, in control of seemingly everything.

History is dotted with such events by the 2%, making such consolidation "plays" to consume power and wealth at mind boggling levels. It's the reality for the world, that we do 100% live in a Plutocracy, that's branded a democracy for public consumption.

This that's happening now with inflation, commercial finance, banking, it's a familiar tune wouldn't you say? As Cheney said "never let a good crisis go to waste".

The story about the Rothschilds and Waterloo was actually completely made up 30 years after the fact by an anti-semitic conspiracy theorist, just FYI! It's not actually true. Just thought you should know instead of continuing to spread it.
https://www.independent.co.uk/...

Side ?, do you have anything on the story of how Rothchild invented banking? And nearly got killed in the doing of such.
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Quote from @Brad Jacobson:

The data point that has me most interested is inventory on market.

In 2007, there were over 4,000,000 residential homes available before the bubble burst. Today, there is less than 1,000,000 despite the high rates. That tells me the residential market is pretty secure.

Commercial properties are the opposite. There are tons of vacancies and much lower demand. I wish I had better numbers on this because my only data is only anecdotal but everyone in commercial I speak to currently worries about banks holding too many bad commercial loans that will all have their rate adjust in the next two to three years.

The fundamental problem with office is that many companies are moving into hybrid workplace where people only come 1-3x a week to office.
From the chart that I read, from realized PSF positioning perspective, PSF required for employee to be working in 2023 has regressed to 2002 level, so if PSF has reduced a lot, then all office ,especially the one build in 1980s, shall have valuation moved to 2002 level. This is the one that's not happening yet in private commercial.

For tech companies, it's true that for company that's solely focusing on software, most of them already moved to 90% work from home anyway.

Most companies want to move away from this and go to either a hybrid (3X/week) or full-time attendance model. Right now, companies still don't have the kind of leverage needed to enforce this, but if the economy does actually reset, they will definitely have more leverage. At least that's the hope. My company is currently on a hybrid schedule but I know they're itching to return to full time. Even with the layoffs, we still have a tight labor market. We are still in a place where reversion to the norm is a long distance. But once we do get back to a dynamic where each new job opening will elicit dozens of qualified resumes, I don't see this can continue.

have lot of comments, one by one :
- I checked the most recent layoff data for startup only as they're one that's most vulnerable, currently at 5/5/2023 the layoff has been normalized meaning the number has been greatly reduced almost near to the average. Most startup funding now tap into bridge commercial loan these days rather than ask for equity investment.

- where company moving forward it seems divided, some want move like before, but most 'software only' co or investment only company is working through 100% WFH model , it seems not having office or greatly reducing office opex is way to go, look at google co where they immediately stopped the project to rebuild campus in downtown san jose

- it seems the majority is still willing to choose hybrid model, not just because of office opex is less but people seems enjoying more work-life-balance these days.

- dont think there would be reversion to the norm. Full 5 days working to office is gone in this century LOL, trend is move into hybrid 2-3-4 days coming to office LOL Friday is the new saturday.

When you say want or willing, are you referring to the employees or high level mgmt? Because I know what employees want :) A lot of them have deluded themselves into thinking they are just as productive at home as they are in the office. I personally like the hybrid model also, but I can tell you without hesitation that although startups don't have strong feelings about coming back to the office, larger companies definitely want at a very minimum a hybrid model. And secretly, they want to move back to a full-time at the office model and they will have the leverage to require that in the future. You have to realize that the labor market is still at usually tight. My company (finance industry) has many req's open with generous salaries. Prepandemic, these openings would get close to a 100 resumes. Now, we aren't able to fill them. Tech companies have a different issue.

Google's halt of its campus was more about caution and the general slow-down in the tech industry as opposed to their desire to move to a WFH model.

haha LOL I got perception that CxO level wanna do hybrid. They don't wanna do 5x 8am-7pm in the office anymore. Maybe financial sector is different than tech, but for few years from now it seems tech is "okay" with 2-4 days in the office only. Another reason is also lot of customer is doing opex optimization so many of them are delaying order, when customer is delaying order then eventually there's no need for folks to be 24/7 8am-8pm in the office like before.

Also with cloud computing with software like Zoom and Ms Team and online collaboration tools, there's nothing that we can't do by online. 5 guys changing spreadsheets ? no problemo. It doesn't even impact any software/hardware delivery quality as process is already there taken in place. But another lesson learned is that there would be more job moving out of US and they would move to usual "cheaper" place.
Another trend that we see and impacting real estate is that all these new built data center is moving to cash-flow state property like Milwaukee LOL
1 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
3y
Quote from @James Hamling:

Quote from @Steve K.:

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @Mike Bybee:

Quote from @James Hamling:

100% agree with that analysis. Also what is not mentioned, the regulators have not required the banks to mark their bond portfolio to market. That consideration isn't even in their stress test eval according to the SVB hearings from the regulators. Literally, as we speak, the community banks are all on tilt, where typically their leverage ratio was at 2-3:1 is now at 10:1 since their bonds are currently worth .50 on the $. This just reinforces your concept that only the big boys will be holding the cards when the music stops. And that is because they are too big to fail. Main street screwed again. Regional banking as we know it today, will be extinct. Much like the S&L debacle back in the 80's.

THis is the playbook in the 1920-1930s too. Remember why JP Morgan exist at the first place ? It's the exact same circumstance.
Any bank failed ? they would just sell it to JPM in one fine weekend. What happened to FRC is so predictable. Now PACW maybe in line for the next weekend to be captured by JPM.

Do you recall the story of how "The House of Rothchild" became the giant it is now, via the Napoleonic war?

They were very wealthy, but not in total dominating control as are now. What they did was set-up a chain of fast ride couriers, a system later used by the Pony Express actually taken as inspiration for such.

And when Napoleon lost at Waterloo, their couriers ran flat out nearly killing the horse to the next in chain, gave the info, then that one raced flat out, unto the next and so on and so fourth so that the Rothchild's were actually the first with the news of the defeat. Being the only ones with this information, they shorted the market and then "leaked" information that Napoleon had WON, and was marching on London at that moment with no forces of strength to longer stand in way of inevitable invasion and fall of London.

The market crashed, hard. And Rothchild made a mint on the short's BUT then bought up EVERYTHING, for now pennies on the dollar. And then the reports arrived from the official sources, the truth that London was safe, Napoleon was defeated.

As dust settled, Rothchild's were now the #1 wealthiest humans alive, in control of seemingly everything.

History is dotted with such events by the 2%, making such consolidation "plays" to consume power and wealth at mind boggling levels. It's the reality for the world, that we do 100% live in a Plutocracy, that's branded a democracy for public consumption.

This that's happening now with inflation, commercial finance, banking, it's a familiar tune wouldn't you say? As Cheney said "never let a good crisis go to waste".

The story about the Rothschilds and Waterloo was actually completely made up 30 years after the fact by an anti-semitic conspiracy theorist, just FYI! It's not actually true. Just thought you should know instead of continuing to spread it.

https://www.independent.co.uk/...

Well, as a Semitic household and persons, this is news to me and I am not too worried about it, nor do I worry too much on some new internet piece saying "200yrs is not accurate, my story is accurate". If inferring I am being anti-myself.... not to worried on that front either, lol. And I will point out your article has a rather different version from the historical one I recounted.
If look up history of Pony Express, it is noted in their earliest accounts the inspiration of their relay rider system did, in fact, come from that point back when. And I never pointed out Rothchild on the battle-field, that's a new twist, the historical is that he had setup the relay-riders so he could gain the knowledge in rapid fashion because the imminent invasion of London was kind-of a big deal.
Rothchild's do have some twisty unsavory history to them, so I would not say anti-Rothchild equates antisemitic, there not like the semitic-mascot or anything.

It's not just the one article, it's been reported on for several years and discussed widely that this story was made up 30 years after it supposedly happened, to defame the Rothschilds, because the writer of the conspiracy was an anti-semite. This is actually just one of many anti-semitic conspiracies about the Rothschilds, so they actually are an anti-semitic "mascot" of sorts, as you say. They've been singled out by hate groups and targeted with a lot of false accusations and conspiracies ranging from profiting from wars, to controlling the world economy, to controlling the weather with space lasers. One conspiracy even claims that the Rothschilds actually orchestrated the Holocaust, so that they could create the state of Israel. It all started with the fake story that you repeated about Waterloo, which is not true:
https://www.ajc.org/translateh...
https://www.britannica.com/sto...
https://www.octaviabooks.com/b...
1 Reply
Robert Carpenter
New York Metro · Member since 2018 · 30 posts · 4 votes
3y
Fair points. However offsite construction is roughly twice as efficient as site built. You get same sq ft at half the cost. Also with site built there is a critical minimum size below which construction is not profitable. Next time you are in a house look for the phenomenon of superfluous space. The tendency in site built is to put in two or three living rooms and two dining rooms rather than fulfill the promise of Wright's open plan living, in order to boost profitability. The kitchen, the most expensive part of a house, has been deliberately outsized and repositioned to the middle of the living room while the dining room is often pushed some ways away - for the purposes of boosting profitability - and in my opinion making a mockery of the open plan. The great awkwardness of the site built home is a function of the builders need to pad it with extra space in order to be profitable. On the other hand there is no such constraint with off site. Homes can be designed which are just the right size. Now where the trend in site built is to expand the house and shrink the lot - so that outdoor space is all but gone and what there is is never used because it has no privacy, offsite presents the great opportunity to include large, pleasant, private garden like courtyards situated between each home.
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
@Scott E. Your title, "Preparing to capitalize on the next market collapse." I'm going to give you use of my crystal ball and I guarantee 100% accuracy.
1. Big Office buildings and complexes will go cheap.
2. Learn how to Surf. Ride the Silver Tsunami. Baby Boomers are getting old. Start getting into Group homes, retirement complexes, assisted living, mental care.
Either find a model where you lease out the buildings and facilities, or you own the facilities and run the business.
The worse situation in the above, is having the people to work this model. But you have guaranteed income and no collection issues.
2 Reply
Michael Margarella
Investor · New York City · Member since 2020 · 164 posts · 75 votes
3y
Quote from @Henry Clark:

Not in a sarcastic sense but I don’t care. We don’t own an office skyscraper, our banks are secure (top 25 safest banks in the US). All three have high equity clientele and recession/inflation safe businesses (food). If a bunch of banks and even insurance companies go bankrupt someone else will pick up their assets. The fact JP Morgan or someone else’s gets rich I don’t care. The fact we the US citizens get the shaft, you get what you vote for. As a developer it’s just another hurdle. Tell me what I need to do and I’ll do it or pay it.
We are developing a 75 acre, 22 lot country subdivision. There is a shortage of houses, we are good. The more it hits the fan, we are good, people want to move to the country side. 25 minutes to 1mm metro area.
Our Selfstorage good and bad economics are great for self storage. We sold our brand new location to pull our largest debt of the table and to drag profit off the table. Decided to pull back in risk and take some reward. Took the cash and paid debt down and bought two properties to hold waiting to develop. See how the economy goes.
Our commercial loans were on 5 year balloons on 25 year terms. We refi’d them a year early. Lost 1% of lower interest for a year, within 6 months rates shot past that. Our banker without asking took us from 5 to 7 years on the balloon due to our relationship.
To me , before asking about the economy I would look at my personal position. Sell off your dogs. I would say hold the cash and don’t pay down debt unless you’re refinancing. Or redeploy into a commercial product that is a sure thing. Even in a bad economy.

Agreed. And as to self-storage,
even if there is a crash, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions. Downsizing, displacement, divorce, and death are, unfortunately, all drivers of self-storage.
And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases.

1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
I just read the chart of CMBS Default loan to different asset class.

Also compare it with one of the Crowdfund hundred of syndication track record.

The result is the same. 1 to 5 hotel goes default, followed by 1 to 10 office class space (in usual place like SF and NYC).

The only "interested" return asset class is only industrial space which almost has no default record.

Self-Storage has return about 33% IRR, so we can say self storage has better risk/reward compare to MF that has 15-18% IRR.
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Michael Margarella:

Quote from @Henry Clark:

Not in a sarcastic sense but I don’t care. We don’t own an office skyscraper, our banks are secure (top 25 safest banks in the US). All three have high equity clientele and recession/inflation safe businesses (food). If a bunch of banks and even insurance companies go bankrupt someone else will pick up their assets. The fact JP Morgan or someone else’s gets rich I don’t care. The fact we the US citizens get the shaft, you get what you vote for. As a developer it’s just another hurdle. Tell me what I need to do and I’ll do it or pay it.

We are developing a 75 acre, 22 lot country subdivision. There is a shortage of houses, we are good. The more it hits the fan, we are good, people want to move to the country side. 25 minutes to 1mm metro area.

Our Selfstorage good and bad economics are great for self storage. We sold our brand new location to pull our largest debt of the table and to drag profit off the table. Decided to pull back in risk and take some reward. Took the cash and paid debt down and bought two properties to hold waiting to develop. See how the economy goes.

Our commercial loans were on 5 year balloons on 25 year terms. We refi’d them a year early. Lost 1% of lower interest for a year, within 6 months rates shot past that. Our banker without asking took us from 5 to 7 years on the balloon due to our relationship.

To me , before asking about the economy I would look at my personal position. Sell off your dogs. I would say hold the cash and don’t pay down debt unless you’re refinancing. Or redeploy into a commercial product that is a sure thing. Even in a bad economy.

Agreed. And as to self-storage,
even if there is a crash, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions. Downsizing, displacement, divorce, and death are, unfortunately, all drivers of self-storage.
And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases.

the problem with self-storage is similar like other asset class, there's oversupply in select market. Not in all markets.
0 Reply
Melanie ThomasBusiness Member
Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 489 votes
3y
You've made some astute observations about the current state and potential challenges in the commercial real estate market. It is true that there are significant concerns and uncertainties surrounding commercial properties. Here are some additional perspectives on the future of commercial real estate:
1. Impact of Remote Work: The shift towards remote work and hybrid work models due to the COVID-19 pandemic has raised questions about the long-term demand for office spaces. Some companies are reevaluating their office space needs, potentially leading to higher vacancy rates and reduced rental income for commercial property owners.
2. Retail Sector Challenges: The rise of e-commerce has already put pressure on the retail sector, and the pandemic has accelerated this trend. Retail property owners face challenges in filling vacancies and attracting tenants, especially in traditional shopping malls and brick-and-mortar stores. Adaptation to changing consumer behaviors and the integration of online and offline experiences will be crucial for the survival of retail properties.
3. Debt Refinancing and Loan Maturities: As you mentioned, a significant volume of commercial real estate loans is maturing in the coming years. If property owners struggle to refinance or sell their properties due to high vacancy rates or declining valuations, it could lead to financial stress and potential defaults. This could have a ripple effect on banks and lenders with exposure to commercial real estate.
4. Potential Opportunities: While there may be pain in the commercial real estate market, downturns can also present opportunities for investors with a long-term perspective. Distressed properties or those facing financial challenges may become available at discounted prices. Investors who can navigate the market dynamics and identify properties with strong potential for redevelopment, repurposing, or adaptive reuse may find attractive investment opportunities.
5. Market Variances: It's important to note that the commercial real estate market can vary significantly across regions and property types. Some markets may be more resilient, such as industrial or logistics properties driven by e-commerce demand. Additionally, suburban office spaces or properties located in areas with favorable demographics and growth potential may fare better compared to prime urban office locations.
6. Ongoing Monitoring: Keeping a close eye on market trends, local economic indicators, and tenant demand patterns will be crucial in evaluating the commercial real estate landscape. Staying informed about developments in the sector, including government policies, regulations, and economic stimulus measures, can help inform investment decisions.
It's worth reiterating that the future of commercial real estate is uncertain, and predictions should be approached with caution. Working with experienced professionals, such as real estate advisors, brokers, and industry experts, can provide valuable insights and guidance in navigating the evolving commercial real estate market.
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
I have yet to find a town I wouldn’t build new storage in. San Diego, San Francisco, Los Angeles, New York City and even Bill, Wyoming.
There are cities where I would not hesitate to build 6,000 units or invest $60,000,000. All about market analysis and strategy.
1 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Melanie Thomas:

Are you using AI to write this? It sure looks like AI, which is not allowed on BP.
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Tony Kim
Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes
3y
Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

Quote from @Carlos Ptriawan:

Quote from @Brad Jacobson:

The data point that has me most interested is inventory on market.

In 2007, there were over 4,000,000 residential homes available before the bubble burst. Today, there is less than 1,000,000 despite the high rates. That tells me the residential market is pretty secure.

Commercial properties are the opposite. There are tons of vacancies and much lower demand. I wish I had better numbers on this because my only data is only anecdotal but everyone in commercial I speak to currently worries about banks holding too many bad commercial loans that will all have their rate adjust in the next two to three years.

The fundamental problem with office is that many companies are moving into hybrid workplace where people only come 1-3x a week to office.
From the chart that I read, from realized PSF positioning perspective, PSF required for employee to be working in 2023 has regressed to 2002 level, so if PSF has reduced a lot, then all office ,especially the one build in 1980s, shall have valuation moved to 2002 level. This is the one that's not happening yet in private commercial.

For tech companies, it's true that for company that's solely focusing on software, most of them already moved to 90% work from home anyway.

Most companies want to move away from this and go to either a hybrid (3X/week) or full-time attendance model. Right now, companies still don't have the kind of leverage needed to enforce this, but if the economy does actually reset, they will definitely have more leverage. At least that's the hope. My company is currently on a hybrid schedule but I know they're itching to return to full time. Even with the layoffs, we still have a tight labor market. We are still in a place where reversion to the norm is a long distance. But once we do get back to a dynamic where each new job opening will elicit dozens of qualified resumes, I don't see this can continue.

have lot of comments, one by one :
- I checked the most recent layoff data for startup only as they're one that's most vulnerable, currently at 5/5/2023 the layoff has been normalized meaning the number has been greatly reduced almost near to the average. Most startup funding now tap into bridge commercial loan these days rather than ask for equity investment.

- where company moving forward it seems divided, some want move like before, but most 'software only' co or investment only company is working through 100% WFH model , it seems not having office or greatly reducing office opex is way to go, look at google co where they immediately stopped the project to rebuild campus in downtown san jose

- it seems the majority is still willing to choose hybrid model, not just because of office opex is less but people seems enjoying more work-life-balance these days.

- dont think there would be reversion to the norm. Full 5 days working to office is gone in this century LOL, trend is move into hybrid 2-3-4 days coming to office LOL Friday is the new saturday.

When you say want or willing, are you referring to the employees or high level mgmt? Because I know what employees want :) A lot of them have deluded themselves into thinking they are just as productive at home as they are in the office. I personally like the hybrid model also, but I can tell you without hesitation that although startups don't have strong feelings about coming back to the office, larger companies definitely want at a very minimum a hybrid model. And secretly, they want to move back to a full-time at the office model and they will have the leverage to require that in the future. You have to realize that the labor market is still at usually tight. My company (finance industry) has many req's open with generous salaries. Prepandemic, these openings would get close to a 100 resumes. Now, we aren't able to fill them. Tech companies have a different issue.

Google's halt of its campus was more about caution and the general slow-down in the tech industry as opposed to their desire to move to a WFH model.

haha LOL I got perception that CxO level wanna do hybrid. They don't wanna do 5x 8am-7pm in the office anymore. Maybe financial sector is different than tech, but for few years from now it seems tech is "okay" with 2-4 days in the office only. Another reason is also lot of customer is doing opex optimization so many of them are delaying order, when customer is delaying order then eventually there's no need for folks to be 24/7 8am-8pm in the office like before.

Also with cloud computing with software like Zoom and Ms Team and online collaboration tools, there's nothing that we can't do by online. 5 guys changing spreadsheets ? no problemo. It doesn't even impact any software/hardware delivery quality as process is already there taken in place. But another lesson learned is that there would be more job moving out of US and they would move to usual "cheaper" place.
Another trend that we see and impacting real estate is that all these new built data center is moving to cash-flow state property like Milwaukee LOL

Man, I totally get what you're saying. Logistically speaking, there really isn't too much downside to being fully remote for many industries. Heck, many startup asset management firms are fully remote. VC firm I used to work for was just one day a week in the office, and that was hardly mandatory also. But as someone who's been in the weeds, I just cannot deny that person to person collaboration, especially in the finance industry, is still much better, swifter and a ton more rewarding than online. There are just so many one-offs that are so much easier to handle when the person is next to you. Also, when it comes to training and onboarding new employees, fully remote is slower and more difficult.
But with that said, I agree that in Tech, this difference in efficiency is much less pronounced. In finance at least, there is a push to return to the office with the eventual goal being full-time. The company I work for, which is a finance giant, has just announced that 4 days week in the office will soon be mandatory. I give it 50/50 odds we will be fully back in the office 5 days a week sometime in '24. Most of the other large investment banks are following the same trend.
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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Tony Kim:

But with that said, I agree that in Tech, this difference in efficiency is much less pronounced. In finance at least, there is a push to return to the office with the eventual goal being full-time. The company I work for, which is a finance giant, has just announced that 4 days week in the office will soon be mandatory. I give it 50/50 odds we will be fully back in the office 5 days a week sometime in '24. Most of the other large investment banks are following the same trend.
Agree on that.

Hi Tony, the biggest issue is this..........so every new office syndication is saying they have 50% office deals right now and think they can lease out their space. But the question is.......... who in the world would lease an large office space in NYC, in Manhattan in the next 24 months ?......... when corporation in Finance and tech is cutting back their opex.
From what I know, less than 9% of office owner has equity in their building. Compare that to 70% of residential owners that has 70% equity or less. The bottom is still far for office.

Even retail mall is also collapsing nowadays.
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Tony Kim
Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes
3y
Quote from @Carlos Ptriawan:

Quote from @Tony Kim:

But with that said, I agree that in Tech, this difference in efficiency is much less pronounced. In finance at least, there is a push to return to the office with the eventual goal being full-time. The company I work for, which is a finance giant, has just announced that 4 days week in the office will soon be mandatory. I give it 50/50 odds we will be fully back in the office 5 days a week sometime in '24. Most of the other large investment banks are following the same trend.

Agree on that.

Hi Tony, the biggest issue is this..........so every new office syndication is saying they have 50% office deals right now and think they can lease out their space. But the question is.......... who in the world would lease an large office space in NYC, in Manhattan in the next 24 months ?......... when corporation in Finance and tech is cutting back their opex.
From what I know, less than 9% of office owner has equity in their building. Compare that to 70% of residential owners that has 70% equity or less. The bottom is still far for office.

Even retail mall is also collapsing nowadays.

Yeah, I hear you.
Back when we had the GFC, investors and retail home-owners lost their homes, large asset managers swooped in and bought these properties at a huge discount. This time around, the underwater commercial buildings are owned by the asset managers. Who is going to swoop in and purchase them at discounts when they can no longer service their debt? It'll be complex, and the trend toward companies like BlackRock, GoldmanSachs and all the other large institutions moving to 5x/week will probably not be enough...which was the original topic of discussion.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
3y
Seems relevant: https://realestate.alexcooper.com/auction-property/1-7QWCAS/...
Foreclosure sale today. We'll see what happens in a few minutes. Assessed value $125mm.
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